Special privileges and tax subsidies from federal and state governments add an estimated $18 billion advantage against private sector rivals like FedEx and UPS in addition to the United States Postal Service’s First Class mail delivery monopoly.
The $18 billion comes through tax breaks and other privileges such as exclusive usage of mailboxes, giving it huge advantages over its private competitors, according to a report made public Wednesday by Sonecon, an economic advisory firm founded by former Undersecretary of Commerce Robert Shapiro.
“The main justification for these and other monopoly rights is to ensure the USPS sufficient revenues to sustain its universal service obligations,” Shapiro’s report said. “The USPS’s monopoly rights and associated subsidies may well impair healthy competition in this large and growing market.”
Such privileges are acknowledged by the Postal Service, but are highly understated. For example, the Postal Regulatory Commission, which provides regulatory oversight for USPS, found that the Postal Service’s exclusive access to mailboxes was worth $810 million in 2013. Shapiro claimed that $14.9 billion was a better estimate.
The commission arrived at its estimate by comparing private sector costs, while Shapiro calculated the cost necessary to deliver all mail and packages door-to-door, as in the case of private companies. The Sonecon report notes, however, that private companies take cost-cutting measures because of their prohibition from mailboxes.
Similarly, Shapiro reported that USPS saved $1.53 billion in 2012 from state and local property tax exemptions, over four times the regulatory commission’s estimate, which used historic, rather than updated, property estimates.
Additionally, unlike its competitors, taxes on the Postal Service’s profits eventually return to its coffers. Such money is deposited into a special U.S. Treasury account that can be spent on USPS expenses.
The Postal Service reported $2.42 billion in net income in 2014 and transferred $848 million in taxes to its special account.
USPS also holds $15 billion in debt to the Treasury with interest rates “far below market rates,” Shapiro reported. Such privileges have helped the Postal Service claim it does not depend on federal tax dollars.
“Perhaps if the USPS did conduct its operations on a business-like basis, it could provide its services and break even,” the report said. “Efforts to raise postal rates, close post offices, reduce mail delivery and reform labor practices typically have been and continue to be met with considerable resistance by the Congress. Inevitably, the USPS continued to lose money.”
In fact, Shapiro reported that the Postal Service has accumulated $51.4 billion in losses since 2006, which was aggravated by the recession and technological advances. First-class mail, USPS’s most profitable product, dropped by more than 30 percent.
“Despite these declining revenues, the USPS raised the average wage and benefits of its employees every year since 2004,” the report said. Shapiro found that Postal Service employees annually make an estimated $18,700 more than the private sector.
USPS also defaulted on required payments to retirement funds since 2011. The amount each year was more than $5.5 billion. Postal Service officials have long argued that those payments are incorrectly calculated.
A spokesman for the Postal Service declined to comment.
